Korea’s core inflation to accelerate in 2023 as utility bills are set to rise

[Photo by Park Hyung-ki]

South Korea’s core inflation is expected to accelerate next year as the country is set to allow utility firms to raise energy bills next year to reflect high oil and other commodities prices to manage their mounting losses.

According to the Bank of Korea and Statistics Korea on Monday, the country’s benchmark consumer price index (CPI) in November added 5.0 percent from the previous year, slowed by 0.7 percentage point from the previous month.

The country’s headline inflation growth slowed from 6.3 percent in July to 5.7 percent in August, 5.6 percent in September and 5.7 percent in October.

But the country’s core inflation excluding food and energy prices, the standard by the Organization for Economic Cooperation and Development (OECD), has extended its growth streak since it exceeded 4 percent in August to 4.1 percent in September, 4.2 percent in October, and 4.3 percent in November.

Without the government’s efforts to control public prices, the core inflation gain would have been much steeper. The country’s core inflation that excludes government-controlled public price rose from 4.6 percent in June to 4.7 percent in July, 4.8 percent each in August and September, 5 percent in October, and 5.1 percent in November when the headline inflation was at 5.0 percent.

[Photo by Lee Seung-hwan]

The Korean government manages the prices of 46 key items, including public utilities, train travel, medical treatment and mobile phone use, to offer public goods at reasonable prices. This is called administered prices controlled by the government for policy purposes.

Despite a spike in oil and commodities prices this year, the government kept utility bills nearly unchanged this year.

But following a hike in taxi fares, the country’s electricity and gas bills are due to rise next year as state-run utility companies are grappling with mounting losses. This means that the country’s core inflation could grow faster next year as the contribution of government-controlled prices to Korea’s consumer prices has been on the steady growth.

The nighttime taxi fare started being applied two hours earlier from 10 p.m. this month in Seoul, and the base fare will be going up from February next year. In Gangwon Province, the inner city bus fare will be going up by 20 percent from next year.

Electricity and gas bills will shoot up by twice the rise of this year.